VZCZCXYZ0007
RR RUEHWEB

DE RUEHMN #0403/01 1941546
ZNR UUUUU ZZH
R 131546Z JUL 09
FM AMEMBASSY MONTEVIDEO
TO RUEHC/SECSTATE WASHDC 9202
INFO RUCNMER/MERCOSUR COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
RHEHNSC/NSC WASHDC

UNCLAS MONTEVIDEO 000403 
 
SIPDIS 
 
DEPT FOR WHA/BSC MARY DASCHBACH 
 
E.O. 12958: N/A 
TAGS: EFIN ECON UY
SUBJECT: URUGUAY: STEPS TOWARD MEETING TAX TRANSPARENCY 
COMMITMENT TO OECD 
 
REF: MVD 0187 
 
¶1. (U) This telegram is sensitive but unclassified, and not 
for Internet distribution. 
 
Summary 
- - - - 
 
¶2. (SBU) Uruguay's tax policy chief David Eibe told the 
Charge July 10 that Uruguay is moving forward on its 
commitment to meet OECD standards on transparency and 
exchange of tax information.  To do so, Uruguay is pursuing 
double taxation agreements with OECD members, and has already 
signed four agreements.  Uruguay would be interested in such 
an agreement with the USG, Eibe said.  Uruguay's current tax 
structure is adequate for its needs, and the country's 
revenue stream is steady.  End Summary. 
 
Background - Named and (briefly) Shamed by the OECD 
- - - - - - - - - - - - - - - - - - - - - - - - - - 
 
¶3. (U) Following an April 2 G-20 meeting, the OECD released a 
report on the progress of 84 countries towards "implementing 
an internationally agreed standard on exchange of information 
for tax purposes."  The report placed rated countries in four 
categories, and Uruguay was one of only four countries -- 
along with Costa Rica, Malaysia, and the Philippines -- that 
fell in the lowest category: jurisdictions that have not 
committed to implement internationally agreed standards.  In 
response, Minister of Economy Alvaro Garcia wrote to OECD 
Secretary General Gurria to inform him that Uruguay does 
indeed endorse OECD standards on transparency and exchange of 
information, as set out in the 2005 version of Article 26 of 
the OECD Model Tax Convention.  In fact, according to Eibe, 
Uruguay had already taken steps to put those standards in 
place previously, but had hoped to wait until after the 
Presidential elections in October.  Upon receipt of Garcia's 
letter, OECD Secretary General Gurria immediately removed 
Uruguay from the "blacklist."  To remain off the blacklist, 
the GOU promised the OECD that it would share tax information 
with countries with which it has signed investment protection 
and promotion agreements, and that it will seek to sign such 
agreements with as many OECD members as possible. 
 
Keeping in the OECD's good graces 
--------------------------------- 
 
¶4. (SBU) In a July 10 call on David Eibe, the outgoing 
Director of the Ministry of Economy's Tax Advisory 
Department, Charge Matthewman asked about the GOU's strategy 
to address the OECD commitment.  Eibe explained that the GOU 
has decided to negotiate and sign double taxation treaties 
that include tax information exchange provisions with OECD 
members.  Agreements have already been signed with Germany, 
Mexico, Portugal, and Spain, and Eibe said that one of those 
(he was unsure which) will be presented to Uruguay's 
Parliament within weeks for ratification.  There has been 
some thought to negotiating with Brazil and Argentina, Eibe 
mentioned, but he indicated that such negotiations would be 
complicated within the Mercosur framework. 
 
¶5. (SBU) The GOU plans to ultimately have 12 such agreements 
in place; negotiations began with the countries that had 
shown the most interest.  The GOU prefers to negotiate double 
taxation treaties instead of simple tax exchange information 
agreements because it believes the tax revenue implications 
of double taxation treaties make those agreements more 
palatable to the parliament.  Eibe indicated that any 
expression of interest from the USG would be welcome; the 
charge explained that we had not received any indications of 
interest by the U.S. Treasury Department at this time. 
 
Uruguay's tax structure: adequate for anticipated needs 
- - - - - - - - - - - - - - - - - - - - - - - - - - - - 
 
¶6. (SBU) Reflecting on the tax structure that he leaves 
behind (after working for six different ministers of finance 
in several presidential administrations), Eibe commented that 
he felt Uruguay is in a pretty good situation.  Tax revenue 
accounts for a steady 29 percent of GDP, while public 
spending is usually between 28-31 percent of GDP.  Uruguay's 
heavy reliance on VAT and the relatively small amounts 
collected from import duties (with no export taxes) helps to 
insulate the country from changes in the values of 
commodities.  The introduction of an income tax during the 
present government helped broaden the tax base, and Eibe 
believes that the next administration will likely only reduce 
it on the margins (perhaps cutting taxes on the earnings of 
 
retirees).  Eibe said he is concerned that tax exemptions for 
new investments had gone too far, and expects the government 
will contact him in his capacity as a private consultant to 
develop options to begin to turn that trend around (for 
future investments). 
Matthewman